Canada Stocks Fall as Oil Declines; Magna International Sinks on Earnings

Canadian stocks fell, completing the biggest weekly drop in more than two years, as energy and bank stocks declined on concern a decrease in U.S. unemployment won’t ensure the stability of the global economic recovery.

Suncor Energy Inc. (SU), Canada’s largest oil and gas producer, decreased 2.4 percent as crude futures fluctuated after five days of losses. Toronto-Dominion Bank (TD) slipped 2.2 percent after Goldman Sachs Group Inc. cut its growth forecast for the U.S. Magna International Inc. (MG), Canada’s biggest auto-parts maker, slumped 12 percent after reporting earnings that trailed analysts’ estimates.

The Standard & Poor’s/TSX Composite Index decreased 217.96 points, or 1.8 percent, to 12,162.17 for a 6.1 percent weekly decline, the biggest since February 2009.

“It’s the fear of a recession,” Karl Berger, a money manager at Toron Investment Management in Toronto, said in a telephone interview. The firm manages about C$400 million ($407 million). “Right now the bears have the upper hand, and until that momentum breaks or stalls, there isn’t a lot of reason to fight it.”

The S&P/TSX plunged 8.3 percent from July 22 to yesterday, sliding to its lowest level relative to forecast earnings since April 2009, as data on Canadian and U.S. gross domestic product, as well as indexes of U.S. manufacturing and service businesses, missed economists’ forecasts. The U.S. Labor Department today said the jobless rate dropped to 9.1 percent as discouraged workers left the labor force.

Persistent Unemployment

“The lack of pickup on the unemployment front and the data last week only confirm that without employment, people aren’t going to spend and business confidence isn’t likely to be at robust levels,” Berger said.

The U.S. has a one-in-three chance of a new recession in the next nine months, Jan Hatzius, chief U.S. economist at Goldman Sachs, wrote in a note to clients today.

Also today, Statistics Canada said Canadian employers added 7,100 jobs last month, less than half the median estimate of economists in a Bloomberg survey.

The S&P/TSX Energy Index fell for an eighth day and ended the week with its biggest weekly decline since February 2009.

Suncor slipped 2.4 percent to C$32.34. Canadian Natural Resources Ltd. (CNQ), the country’s second-largest energy company by market value, retreated for a ninth-straight day, the longest streak since 1998, losing 2.6 percent to C$35.25. Athabasca Oil Sands Corp. (ATH), PetroChina Co.’s partner in oil-sands development, slumped 6.5 percent to C$12.98 to extend its two-day loss to 17 percent.

Lenders, Insurers

The S&P/TSX Financials Index fell to the lowest level in 11 months. TD dropped 2.2 percent to C$73.85. Canadian Imperial Bank of Commerce, the country’s fifth-largest lender by assets, declined 1.7 percent to C$70. Insurer Fairfax Financial Holdings Ltd. (FFH) lost 2.1 percent to C$383.85.

Raw-materials producers retreated as copper finished its biggest weekly decrease since June 2010 and silver and gold slipped.

Teck Resources Ltd., Canada’s largest base-metals and coal producer, fell 3 percent to C$41.62. Barrick Gold Corp., the world’s largest producer of the metal, dropped 1.1 percent to C$44.89. Silver Wheaton Corp., the country’s fourth-biggest precious-metals company, declined 2.4 percent to C$33.60.

Magna plunged 12 percent, the most since March 2009, to C$38.80 after sinking as much as 25 percent earlier. Second- quarter earnings trailed the average analyst estimate by 19 percent, excluding certain items. The company cited an increase in raw-materials prices for a 4 percent decrease in profit.

Linamar Corp. (LNR), Canada’s second-largest auto-parts maker, slumped 9.1 percent to a 17-month low of C$17.05.

Directory publisher Yellow Media Inc. (YLO) tumbled 12 percent to 97 Canadian cents after at least three analysts cut their ratings on the stock. The shares plunged 43 percent yesterday after the company cut its dividend 77 percent.

Estimates Cut

Valeant Pharmaceuticals International Inc. (VRX), Canada’s largest drugmaker, fell 5.5 percent to C$38 after at least six analysts cut their price estimates on the shares. Valeant sank 20 percent yesterday after reporting second-quarter net income that missed the average analyst estimate.

Westport Innovations Inc. (WPT), which develops natural-gas engine technology, jumped 7.4 percent to C$22.81 after raising its sales forecast for the year. The shares have gained 24 percent this year, the most among S&P/TSX industrial companies.

SNC-Lavalin Group Inc. (SNC), Canada’s largest construction and engineering company, decreased 5.3 percent, the most since May 2009, to C$49.32. The company’s second-quarter earnings missed the average analyst estimate in a Bloomberg survey.

Pharmacy-benefits manager SXC Health Solutions Corp. (SXC) retreated for a second day after reporting earnings that trailed its average analyst estimate, excluding certain items, slumping 8.3 percent to C$49.03. The stock’s 19 percent weekly decline was the most since October 2007.

To contact the reporter on this story: Matt Walcoff at Mwalcoff1@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net

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